Unpacking the TFTA in Africa
The recent momentous occasion where members of the Southern African Development Community (Sadc), Common Market for Eastern and Southern Africa (Comesa) and the East African Community (EAC) signed the Tripartite Free Trade Area (TFTA) could be the impetus to driving intra Africa trade.
African countries viewed worldwide as the producers of raw materials for European industries had failed to come up with a working formula that encourages trading among member states, but jostled for that opportunity to trade with either the European Union and the emerging Asian market where they eventually got subjected to unfair pricing.
Ironically in most cases African countries failed to get a better bargain for their raw materials which developed the world’s industries and created jobs for other continents in the world while the mother continent suffered with rampant famine and runaway unemployment.
While Intra African trade constitutes only two percent of global trade the initialling of a formal agreement that took five years to agree on could push more African countries to join the grandiose trade engagement and boost trade relations on the African front.
Currently the agreement has 26 members which constitutes about half of the countries in the continent.
The game of numbers
Research shows that between 2004 and 2014 trade within the Comesa region grew from US$8 billion(approximately N$80b) to US$22 billion (approximately N$220b). Over the same period trade within Sadc grew from US$20 billion (approximately N$200b) to US$72b (approximately N$720b) and for EAC it rose from US$2.6 to 8.6 billion. The overall trade between the three areas rose from US$30.6 billion to US$102.6 billion over the same period.
Despite the growth, only about 12% of Africa’s trade is intra-regional. It is 22% for South America, 40% for North America, 50% for Asia and 70% for Western Europe. The tariff liberation of 60–85% will have a significant impact in facilitate the cross-border flow of goods and services.
The TFTA will benefit Africa in at least six mutually reinforcing ways. The TFTA will generate the impetus for the creation of similar arrangements in western Africa, bringing economic powerhouses such as Nigeria into a continental free trade area. In fact, negotiations for an overarching agreement will be launched in 2015, with the projected creation of an Africa-wide free market in 2017.
While many will wait to see the advantages of such an engagement the reality is that the signing of the document sets in motion the wheels of creating a borderless economy for the continent and also pushes the member states who are signatories to the agreement to look at their import and export duties which need to be done away with if a reasonably dormant continent like Africa is to accrue results.
The deal will have a combined gross domestic product of more than $1 trillion (885 billion euros).
Unpacking the significance of the TFTA, Calestous Juma, Professor of the Practice of International Development; Director, Science, Technology, and Globalization Project; Principal Investigator, Agricultural Innovation in Africa, Francis Mangeni in their publication, The benefits of Africa’s New Free Trade Area argued that, “The creation in June 2015 of a free trade area from Cape Town to Cairo is possibly the most significant event in Africa since the formation of the Organization of African Unity in 1963. It is a grand move to merge existing regional organization into a single African Economic Community.”
They added that, “The TFTA covers a population of 632 million and a combined GDP of $1.3 trillion. The area spans 17.3 million square kilometres, which is nearly twice the size of China or the United States.
“Critics argue a single trading bloc will not work where individual sub-regional ones have failed. To the contrary, consolidation of the three trading blocs will build on previous trade gains and will result in the whole being larger than the sum of its parts.”
Commenting on the signing of the agreement Egyptian President Abdel Fattah al-Sisi was quoted by international media saying “We have told the word today... of our desire to adopt practices that are necessary to increase trade among ourselves... We will do whatever is possible to activate this agreement,” WHILE World Bank President Jim Yong Kim said that with the launch of the TFTA “Africa has made it clear that it is open for business.”
One of the benefits of the agreement is that it has managed to attract attention from Africa’s strongest economies including South Africa which is rapidly growing and Nigeria which has the biggest Gross Domestic Product in the continent.
A cemented launch pad like that will ensure that the small economies in the continent will have to falter to the pull factor as they have no option than to go where the big guns are.
There is also an advantage on making such a move work in that the bulk of the African continent agrees that very little has been done to foster intra African trade and perhaps that notion see the drive in all of the leaders to make this work.
There is also that obvious push that African believe that if trade among themselves flourishes it is most likely to do so if it’s carried through favourable conditions for all participating countries. This subsequently pushes away the bullying mentality that has been the order of the day when dealing with other trading bloc’s worldwide.
Impediment to the TFTA
There is obviously that general impediment that point to exactly what the African economies will trade among each other as they are all stuck in the preproduction phase and have not done enough to boost manufacturing. Manufacturing is the backbone of driving trade as in most cases it allows countries to trade in finished products.
Africa’s economies are hinged on raw material exports (mostly production of minerals, and oil). This is where it will be very difficult for the countries to need each other’s products as they have pretty much the same products that cannot be interchanged.
One would have expected that at the same time that the continent was pushing towards a grandiose trading agreement they would also have been pushing favourable industrial policies that grow the manufacturing industry.
A few economies in Africa are at an advantaged stage of manufacturing. These are probably South Africa, Egypt and probably Morocco while the bulk of them including Namibia, Zambia and probably the rest of the Sadc region is still stuck in the infancy of manufacturing and cannot stomach the challenge of supplying a vast market as they do not even cater for their domestic needs.